Systematic patterns include snappy repetitive rebounds that precede ensuing shakeouts.This occurs repeated based on tidbits about what I've term 'known unknowns', earnings reports; and repeatedly occur whenever S&P technical support points are approached; breached, or prior lows broken if only temporarily. Taken to extremes, there can be 'systemic risk' because of the disproportional share of wealth concentrated in equities, as contrasted to other financial assets on an historical comparison. That's a topic I've brought up before; but is rarely considered in assessments.  

Friday's rebound was technically triggered at the prior day's low; but it was telegraphed (per my video comments last night) by Secretary Mnuchin and the PBOC Head (at a conference in Indonesia). Or, rebounds can form or be stimulated in response to (Bank for instance) earnings the market likes; but then very quickly get sold into.  

Two reasons for that next selling squall: too many failing to contemplate a slowing or sluggish 'global' economic environment (as Jimmy Dimon today sort of reminded them today); and procedural selling on rebounds persists too. They tried to engineer an intraweek technical double-bottom for S&P; but failed. This does not ensure that 'we've gone so far down that it goes up', as some are saying.  

Now, I don't believe the upcoming Midterms will automatically replace the 'Balls & Chains' that were inhibiting both small and big business for years; although there's a crowd out there that believes that; hence perception as usual matters. Many perceive the Midterms as a risk; even though from a personal standpoint I don't believe a 'Blue Wave' would replace the revised 'corporate' tax rates; but probably would increases taxes on the top 1%.  

If that occurs (and the majority of middle and upper-middle income earners in this Country are not negatively impacted); the markets will be relieved. I factor that kind of 'known unknown' into why I've spoke of correction, with a lower prospect of catastrophe that some focused on Debt harp upon for years actually (most of them entirely missed the Trump advance; so while I do agree there is a huge debt problem beyond deficits; I was very bullish in prospects for the market (and small business) 'if Trump won' mostly for 'tax and reform' reasons.  

Hence besides a 'to the Moon if he wins' forecast, I added a suggestion for investors: to 'separate one's investment from political decisions' if that was needed. So while many will suspect (and the market behavior is part of it now perhaps) a complete unwinding of policies; I don't expect that. But we live in a world of 'perceptions'; and I thought the market would err more or the side of caution ahead of Midterms. China is an entirely different story, that I have discussed before. Trade probably means more to stocks. 

Bottom line: the corporate bond market looks ok with tight spreads; but a widely-expected higher growth rate continuity matters. The cost of capital goes up too; not from default lists, but from the bond market saying 'pay more' in the better environment. Obviously that changes if we're emerging from later in the growth cycle (or already slowing contrary to most beliefs).  

Negative real interest rates is what drove stock prices higher along with all the tax cuts; and the facilitated buybacks that have diminished as rates go up. That puts pressure on stocks besides less attractive equity valuation in terms of the Averages. It's not just a matter of rotating into 'safer' stocks as the analysts typically suggest; because some of these concerns can effect a broader cross-section of holdings (sometimes raising cash does that too; especially where investors stayed blissfully long throughout a distribution).

In sum: we've repeatedly explored what is known (distribution all year on a series of 'Rinse & Repeat' rallies and declines which got quite ragged all along the way) and what is unknown (such as 'China trade' and Midterms); and will continue to ferret out any meaningful nuances if we are able. For now in the case of China; even the White House doesn't know the nuance of the G20 'meeting' yet; as evidenced by contradictory statements about whether or not a formal Meeting between Trump & Xi has been confirmed.